The Chinese Noah's Ark emerged from Cell phone batteries

"Where is Noah’s ark to save human beings?": can Chinese companies, like BKD, transform renewables?

Great companies have a purpose that goes beyond making money. Google wants to organize the world’s information. Walmart seeks to save people money so they can live better. The Walt Disney Co. tries to make people happy. (Or at least it used to; Disney’s current mission statement is a bunch ofgobbledygook.)

Purpose matters. It’s a big reason why people go to work every day.

BYD, the Chinese company that makes electric cars, batteries and solar panels, has a grand purpose: It wants to save us all from climate change, which it calls “slow suicide.”

In a new company video (below), BYD says:

Glaciers are melting. Sea levels are rising. Who can guarantee that the next victims won’t be us?

Where is Noah’s ark to save human beings?

Where, indeed?

I’ve been fascinated by BYD — the letters are the initials of the company’s Chinese name, but they have come to stand for Build Your Dreams — since writing a FORTUNE cover story about the company in 2009. Two years ago, I visited BYD in Shenzhen, met with its founder and chief executive, Wang Chuan-Fu, and spoke about the company with Warren Buffett, Charles Munger and especially David Sokol of Berkshire Hathaway, who sits on the BYD board. Through its MidAmerican Energy subsidiary, Berkshire Hathaway bought 10% of BYD for $230 million in 2008. Despite some recent stumbles at BYD, the company’s market capitalization has grown to about $33 billion, so Berkshire’s stake is now worth about $3.3 billion. Not too shabby.

Lately, I’ve been in contact with U.S. investors who are bullish about the firm. One of them, Shai Dardashti, a Buffett admirer who runs a small money management firm, pointed me towards this seven-minute company video. It’s worth watching (although it ends abruptly for reasons that I haven’t been able to determine).

This video is fascinating in light of BYD’s remarkable but brief history. Since 1995, it has evolved from a manufacturer of cell-phone batteries into one of China’s largest automobile companies and it is now making a major push into clean energy, both with the manufacturing of solar panels and  utility-scale batteries to store energy. (For more on BYD’s energy storage plans and MidAmerican Energy, see Warren Buffett’s Big Battery Play at GreenBiz. Recently, the city of Los Angeles’s Department of Water and Power (LADWP) and BYD said they would work together to develop a grid-scale battery project for renewable energy storage.

In an email this week, Stella Li, a senior vice president of BYD, told me that solar power and utility-scale energy storage are key parts of what she calls “BYD’s 0-emission solution” and “total green solution.” The idea is to generate energy from the sun, store it in batteries until it is needed and then use the electricity to power BYD’s electric cars and buses.

As the company’s video says:  “How to transform the unaffordable [solar, battery, electric car] technology into affordable and high quality products: This is BYD’s responsibility and its mission as well.”

BYD has its skeptics. The company postponed the introduction of its e6 electric car. BYD’s auto sales, earnings and share price fell this fall, according to Reuters. In October, BYD was fined $443,000 by China’s Ministry of Land and Resources and seven of its factories were seized by the government because the company illegally built them on land set aside for agriculture; the factories were for future production, the company told Bloomberg.

Given the companies outsized ambitions, more stumbles surely lie ahead.

But there are good reasons to believe in BYD. Among them:

Low-cost brainpower. Chinese manufacturers are the low-cost providers of electronics, toys and textiles because factory workers are paid so little.  BYD’s more significant competitive advantage comes because the company  can hire skilled engineers at a fraction of what they would be paid in the U.S. or Japan, probably less than $1,000 a month. The company employs more than 30,000 engineers. They come from top universities and only those that make it through a challenging, competitive probationary period stick with the company. Its R&D operation, as a result, is vast. BYD can afford to make mistakes.

Battery technology: In BYD’s first business, cell phone batteries, the company dislodged entrenched, global leaders like Sony and Sanyo. Batteries remain central to BYD. Much of the due diligence carried out by Berkshire Hathaway’s Sokol focused on batteries. If BYD can continue to improve on battery costs and efficiency–a big if–the company will improve its competitive edge in three different businesses–rechargeable batteries for consumer electronics, electric cars and energy storage.

The China factor: It’s hard to know what the government’s crackdown on BYD over its factories really means; if the company falls out of favor with the authorities, all bets are off.  But Chinese-owned green businesses like BYD are sitting pretty today. While China’s economy isn’t as centrally managed as it once was, the country still produces five-year plans; as my colleague Brian Dumaine recently reported in FORTUNE, the “government recently decreed that 5 million electric cars will be traveling the nation’s roads by 2020 — up from basically none today.” The government provides all kinds of support (cheap land, tax breaks, low cost loans) to favored companies.

Source: http://theenergycollective.com/marcgunther/48955/where-noah-s-ark-save-human-beings?utm_source=feedburner&utm_medium=twitter&utm_campaign=The+Energy+Collective+(all+posts)

NUTSHELL:

It's amazing how modern day businesses evolve in order to remain relevant in the competitive space. This brings to mind Michael Porter's work on the generic competitive strategies of cost leadership and differentiation focus. Differentiation (variants of the same product or entirely new product) leads to multiple product offerings by a company in order to increase earnings, diversify customer base, leverage on core competence, increase company life cycle, hedge against risk, tap into economies of scale and above all, secure competitive advantage. While practising differentiation, it is possible that a company may stumble upon a gold mine; case in point Apple with its ipod, iphone and ipad, Sony with the Playstation and Nokia  with Cell phones. Who would believe that Nokia started off as a paper company in 1865? The company expanded its offerings to rubber, cables, electricity and electronics and is an established phone maker today.

BYD began with batteries and is emerging as a manufacturing champion for clean energy by aiming to produce some of the cleanest cars today. What is your business strategy? Are you stuck on the same spot? Maybe you should try some differentiation. Individuals....are you stuck in a rut? Maybe it's time to expand your horizon and try new things and open new doors. Who knows; you might open a door into a world where your ideas will produce the next Noah's ark!